20% off still verboten in Germany

Did Summer 2001’s repeal of Germany’s Rabattsgesetzt competition law clear the way for C & A’s ‘20% off everything’ discount promotion?

Topic: Promotion Marketing

Who: Marketing

Who: C&A and the Dusseldorf Court

Where: Germany

Where: Spring 2002

What happened:

The major retail chain C&A offered a reduction of 20% on all clothing purchases provided a credit card was used to make payment. It did this on the introduction of the Euro and announced this promotion as a form of consumer service. The idea was that using a credit card to make payment would reduce waiting times at checkouts and relieve consumers of the confusion of dealing with the new Euro bills and coins.

C&A may have thought that it was quite legal to do this following the scrapping in July 2001 of the infamous German "rebate law". This made it illegal to offer a reduction of more than 3% on any price. However C&A were to be disappointed. A prosecution was still brought in respect of the 20% reduction, but on the basis of a separate set of German restrictions affecting retail discounts. This only allows discounts during certain periods of the year (namely 2 weeks in winter, 2 weeks in summer and on an anniversary if the figure of the anniversary can be divided by 25). Only during these legally defined periods can a retailer offer reduced prices for all its products, and since C&A's offer was not made during one of these periods it was therefore illegal. Accordingly C&A were injuncted from continuing the promotion.

Why this matters:

C&A was not fined in the initial judgement, although it may have to pay a fine if it disobeys the injunction. The verdict shows that the scrapping of the German rebate law in the summer of 2001 was not the end of the story so far as Germany's far-reaching "unfair competition" laws are concerned. It must also be remembered that even in the area of rebates, the repeal of "that law" last year has still left a residuary control. This is in the form of a rule that any discount promotion which offends against "good morals" will be contrary to law. It is still not clear from court decisions what this phrase actually means in practice. There is still a danger, however, that German judges will rule against discount promotions as “contrary to good morals" if they feel that they have the possibility of "forcing" the consumer to buy a product without thinking about its merits.

Acknowledgement:

Our thanks for this piece go to Dr Peter Schotthöfer of Schotthöfer Jennes and Scharrer of Mûnich.